Unregulated Prices

by Editor
December 3, 2013 at 1:00 pm

https://www.smartertimes.com/1072/unregulated-prices

The ambitious and lengthy New York Times series by Elisabeth Rosenthal on health care pricing has been illuminating and will probably win a Pulitzer, but sometimes a left-wing agenda — or sometimes not so much an agenda but just a set of unexamined assumptions — can't help but peek through even in the best Times journalism. From the latest Times article, on the price of getting stitched up at a hospital emergency room:

The main reason for high hospital costs in the United States, economists say, is fiscal, not medical: Hospitals are the most powerful players in a health care system that has little or no price regulation in the private market.

Think about that for a minute. Walmart is a powerful player in the retail market, and it's known for low prices, not high ones. Amazon is a powerful player in the publishing market and it uses its power to deliver low ebook prices to consumers. McDonald's is a powerful player in the food market and it uses its power to deliver "dollar menu" pricing. Most parts of the American economy have "little or no price regulation in the private market." To take one example that cuts close to the Times bottom line, prices of online advertising are not regulated, and they keep going down, even as the Times keeps increasing the (unregulated) price of having the newspaper delivered to one's doorstep.

There are other factors at work that the Times touches on that are probably more important. One is the lack of information for individual consumers on prices. Trying to figure out in advance your out of pocket costs for a hospital procedure is nearly impossible. Another is the prevalence of third-party payers. Another is the limits on supply and competition — barriers to entry — created by caps on medical residency slots, restrictions on foreign-trained physicians who want to practice in the U.S., and "certificate of need" requirements for new facilities. FInally, people who can afford it are willing to pay a lot for services that will save their lives or improve their health, and for the perception of high quality. In other words, there are lots of factors here other than the lack of government regulation. Some of the factors are even cases where the presence of government regulation contributes to the higher costs. But the Times highlights the lack of government regulation, because it has an assumption that more regulation is good.